Gross doesn't disappoint in walking through an argument that is,
pretty much, only for wonks; but in its most distilled form,
Gross's argument is that if the outstanding debt of the U.S.
carries an average interest rate of 4.5%, then credit growth
needs to expand at that rate to pay for outstanding interest.
Currently, we're falling short of that.

Gross writes that the Fed is, "underachieving that target
in the U.S., which is the reason why GDP growth struggles at 2%
real or lower and nominal GDP growth seems capped at 4.5% or
lower. Credit creation is essential for economic growth
in a finance-based economy such as ours. Without it, growth
stagnates or withers."

Gross includes this chart, which shows the tepid rate of credit
growth since the financial crisis.

PIMCO

Gross writes that the current "global monetary experiment" being
undertaken by central banks — holding interest rates near zero,
and in the case of the U.S. and Japan and potentially the
Eurozone, asset purchases — may support the economy and calm
markets.

"Over the long term, however, economic growth depends on
investment and a rejuvenation of capitalistic animal
spirits — a condition which currently does not exist,"
Gross writes.

Back in the spring, Liz Ann Sonders of Charles Schwab
highlighted a chart showing the increase in total loans &
leases, which accelerated in the early part of this year.

An updated version of that chart from the Fed shows that this
trend has continued.